GST Cut’s Mixed Blessing — Fueling ICE Demand, Slowing EV Momentum?
GST Cut’s Mixed Blessing — Fueling ICE Demand, Slowing EV Momentum?
India’s proposed GST overhaul, likely to be unveiled by Diwali, brings both cheer and caution for various sectors. As part of this reform, small internal combustion engine ICE cars under 4 m in length and 1,200 cc engine capacity could see GST reduced from 28% + 1% cess to just 18%, while larger vehicles edge up to a 40% slab from existing 43–50%, and EVs remain at 5% GST , .
Auto and consumer segments have reacted positively: auto indices soared nearly 5%, led by Maruti Suzuki and Hyundai, while FMCG and consumer goods firms rallied on expectations of easing tax burdens and stronger festive-season demand.
Yet beneath the optimism lies an unintended downside: HSBC warns that lowering taxes on ICE vehicles may erode the savings advantage EVs currently hold, potentially slowing their adoption despite favourable long-term policy goals.
In short, while consumers and traditional automotive players may benefit from cheaper prices, the EV industry's competitive edge could be blunted—posing a paradox for India’s push toward cleaner mobility.
Bottom Line
The proposed GST overhaul aims to ignite consumption and boost traditional auto sales—but risks undermining the EV revolution quietly gaining momentum. Investors and policymakers will need to strike a balance: stimulating near-term demand without derailing long-term sustainability goals.
By Nehal Taparia
This content is for educational and knowledge purposes only and should not be considered as investment or Trading advice. Please consult a certified financial advisor before making any investment or Trading decisions.
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Q1: Who stands to benefit the most from the GST changes?
Small ICE vehicle makers — e.g., Maruti Suzuki, Hyundai, Tata Motors — may see strong volume growth due to the tax cut from ~28% to ~18%.
Consumer goods and FMCG companies — such as Hindustan Unilever, Nestlé India, and Dabur — could benefit from lower GST on everyday items, driving up consumption.
Q2: What’s the downside for the EV sector?
Q3: What about broader market sentiment?
Q4: Could there be any unintended consequences?
Q5: What should investors watch for?
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